7 macro reasons why AUD/USD is a BUY + Technicals

Hi traders,

It has been a while since my last post, I apologize for that.

Those of you who followed my recent activity know that I spent the last few months on developing a new macro model for the FX market that sorts currencies based on a number of factors, giving each currency a score.

I am pleased to announce that the first version of the model is now live. Please feel free to comment and provide your insights for the future development of the model.

The scoreboard will be updated each week, and the idea is to match strong currencies (score above 5) with weak currencies (score below 5). Heavy back-testing returned promising results, but this is the first time one of the signals is traded live.

I'll shed more light on each of the model's components in future posts. You'll also find my new analyses substantially longer than my previous ones.

This week, the Australian dollar is one of the currencies with the highest score, which combined with the weak score of the US dollar could provide a possible buying opportunity.

CommaFX Macro Score, Week 3 (Jan 13-17):

AUD: 7 / 10
USD: 3 / 10

Above 5 is bullish , below 5 is bearish .

1. Country Outlook

US: Expected fall in US GDP, CPI slightly softer, interest rates on hold. A modest increase in fiscal spending.
Australia: CPI revised upwards in last MPC meeting. GDP growth slightly lower.

2. Economic Surprises

US: Besides NFP beat, other economic indicators are mostly neutral.
Australia: Strongly positive economic surprises, 1-week: 10/10, 4-weeks: 7/10, 3-months: 5/10

3. Risk Sentiment

Risk appetite 7.5/10 (modestly positive), supporting a stronger Australian dollar

4. Interest Rates

As of January 13, slightly negative for the USD ( 3m deposit rates), a large increase in Australian interest rates (second-strongest after the NZD). Diverging 2-year and 10-year yields.

5. Flows / Positioning

Very strongly decreasing bullish positioning in the US dollar (5/10), strongly decreasing bearish positioning in the Australian dollar (7/10)

6. Risk Reversals

Sentiment slightly towards a higher AUD/USD , 1-week put/call volatility difference for the pair up 0.2 (as of Jan 13)

7. Technicals

Strong bullish candle at the 61.8% Fib level, aligning with a pullback to the trendline and a horizontal support level . Long-term falling trendline broken to the upside. Hidden bullish RSI divergence . Pair could see further strength during the week.

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